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Spencer Levy
I think it's a pretty good bet that many of our listeners who work in real estate, especially those of you in construction or engineering, played with Legos when you were kids. I mean, who didn't? On this episode, we welcome someone who says he still plays with Legos for a living, leading a modular construction company that aims to change the way we build, with an eye on affordability, sustainability, speed and perhaps above all, bottom line costs.
Andrew Staniforth
It's just an Econ 101 problem like supply and demand. The more housing that you build, it will lower the price. And I think as we start getting to scale, we hope to be able to move the market.
Spencer Levy
That's Andrew Staniforth, the CEO of Assembly OSM, a six year old venture-backed construction startup that specializes in high rise urban modular buildings with a stated mission to transform the construction industry. Andrew and I sat down at the University of Pennsylvania in Philadelphia, site of the recent Wharton-Weitzman Future of Cities Conference. He took us inside this innovative enterprise, breaking down not only the nuances of the design and build processes, but also how assembly deals with challenges of the labor market, government regulations, affordable housing needs, and more. Coming up, building up with Assembly OSM, competing with traditional construction, and working to make modular a more viable and appealing solution. I'm Spencer Levy, and that's right now on The Weekly Take.
Spencer Levy
Welcome to The Weekly Take. And today we're going to cover a topic we've wanted to cover for a long time, and I'm thrilled to be doing it today. We’re talking about modular construction with Andrew Staniforth. Andrew, welcome.
Andrew Staniforth
Thank you. I'm really excited to be here.
Spencer Levy
Well, we're excited to have you. So, what is a modular building?
Andrew Staniforth
Oh, great question. So I think a lot of people think about modular as built off-site, stacked somewhere. There's different flavors where you can build walls or panels or bathrooms. But we think about modular as volumetric modular. So you basically build the building in chunks, let's call it 14 feet wide by 40 feet long, stack them up, and our focus is on the high rise area so we can go up to about 30 stories.
Spencer Levy
So, 30 stories. I know you have some jobs that are going now that are smaller than that, but today the height limit is about 30?
Andrew Staniforth
Yeah. The way that we think about our approach is we want the modules to stack like Legos. So one module is fully supported by the lower module all the way up. After about 30 stories, you start needing to introduce external bracing and stuff like that for wind load. So we, right now, are topping out at about 30 stories. Project one was three stories, project two was 15. So we're inching up to that 30 story point. But whether it's 30 or 28 or 32, it's around that mark.
Spencer Levy
Let's go back to the comment you just made a moment ago, which I think is the one where most people visualize modular. They think of Legos, they think of erector sets, they think about, toys is the wrong way to put it, but basically things that we all understand stacking one on top of each other. And that's both a good thing about modular, but it's also a new thing about modular. How do you get people over the, this is maybe the new thing, but it's totally the way to go today in certain places.
Andrew Staniforth
Yeah, I think with modular we use a lot of analogies. We either use the Legos or Ikea, or, you know, just trying to get people to start thinking about putting things together on the spot. I think Legos is a good one. It really captures the connection. Details are standardized, right? But you can get Lego blocks in different shapes, but they still go together. For us, it's really about how do you get people to start understanding what this is so that we can overcome some of the barriers to adoption. And also, there's been a lot of modular attempts that have not gone well. So really having to reprogram people when they think about what modular is capable of is a really big part of what we have to do at Assembly.
Spencer Levy
Let's break that down a bit. Modular has been around for a while and there have been a lot of barriers to it. Some of it's aesthetic. Some of it has to do with the labor question about who builds it, how much labor is used. What's been some of the impediments in the past and how are you overcoming them today?
Andrew Staniforth
There are two big categories of blockers that have stopped modular adoption at a grand scale in the U.S. And the reason I'm focused on the U.S is, modular is adopted… you look at the Nordics, you look at Japan, huge adoption there. But in the U.S., it's single digit percentage points for the last 50, 60 years. And I break it down into these two categories. One is the technical side and then the other is the business model. On the technical side, it really is, modular for the last 50 years has been the Henry Ford Model T style of modular. You get any color as long as it's black. And that is fed into this perception that modular is not high quality, is not high design, and has really limited the adoption from a physical perspective. And then on the business model side, the way that a lot of modular companies have operated is they open a big factory, they bring the men and women, the labor force, they bring the raw materials, they build the building under a roof, essentially, and then they ship it out and stack it up. They haven't changed the process, but they've spent a lot of capital on this big, beautiful, brand new factory. Now let's think about the business model of real estate. You have real estate developers who are raising capital from LPs and construction lenders. You are really interest rate sensitive. You're really cap rate sensitive. And there's a huge political side, right? You have stroke-of-pen risk in every major jurisdiction. So now you have this giant factory, beautiful, humming along. And then something happens. Interest rates go up, the Fed does what the Fed does. And all of a sudden your pipeline evaporates and then you end up with nothing. Your factory goes under. So what we've seen cyclically is modular companies in hot markets in real estate pop up and then they die and then pop up and then they die. And I think a big part of what we've tried to do at Assembly is focus on both the physical side. How do you overcome a lot of the limitations that have focused on standardization, you know, low design? But also on the business model side, how do you build a resilient modular company that stays alive long enough to move up the learning curve by having multiple reps in what we're doing building buildings?
Spencer Levy
We're in Philadelphia today. You're based in New York City. And, you used to work for a big development company before you started.
Andrew Staniforth
Yeah, I worked for a couple big developers.
Spencer Levy
So how much did that experience help you with your venture today?
Andrew Staniforth
I think a big part of what we're doing at Assembly is about embracing the way that the regulatory hurdles work today. Understanding that the DOB is going to be involved, understanding that the DOT is going to be involved, the community is going to be involved, HPD is going to be involved. And the first three years of our company, we call this the R&D phase of the company, we did a couple really important things. We did a ton of prototyping. And we worked with the DOB without a building. And what was really important there is, the Department of Buildings is always being asked for something. Can you please expedite my permit? I need you to do this. They're never just asked to be a thought partner. And the first three years of our company, we just said, hey, we have no agenda other than coming up with the best pathway for you to approve modular buildings in New York City. And we just sat down with them and came up with this pathway that, now that we're actually executing, it's not just built the pathway from a technical perspective, but it's built a lot of goodwill with people that are going to be in this process going forward. It does take some time for you to get that regulatory, governmental acceptance, but we started with that as a discrete phase in our journey to commercialization. And I think that has paid dividends now that we're actually executing, because it's just going so much smoother than other projects that come into the city and say, hey, I have this amazing solution that you've never seen, can you please give me a permit in two weeks? That's not going to go well. And I think the way that we think about expansion to other geographies is going to mimic that. We started in New York because it is one of the hardest markets from a regulatory perspective, but it also sets the high watermark for what we're able to do when we enter a new market. We've done tons of fire tests, brought them out to the facility, third party independent testing agencies, all of these things that they required or we offered up to make sure that we could now build buildings at scale in a market like New York.
Spencer Levy
So let's compare and contrast for a moment one of the projects you're working on now or have completed. And again, hypothetically, you could have done it modular, you could have done it the traditional way. Talk to us about how those processes, how the product is different.
Andrew Staniforth
Yeah. On the product side, one of our big goals is that the end consumer can not tell the difference. And we actually do, now that the first building is up, we do a little bit of a party trick where we ask them, can you tell us where the modules are and they can't answer correctly. And then we give them augmented reality goggles where they can see through the walls and see the modules. On the product side, we don't want people to know. And that's going to be a big part of our ethos is, we want it to be as beautiful, as high quality as you would get anywhere else. From a process perspective, it's a little bit different, because a lot of the subassembly components. So when I say subassembly, I mean the kitchen pod, the bathroom pod, the structure, the bones are designed, but the aesthetics are not. So I don't want to change what's in the walls. I don't want to change the configuration of my risers or the way that the structural chassis connect to each other. But I can change dimensions, I can change finishes. So during the design process, it's really focused on the things that the consumers see, the resident touches. But inside the walls we've done that already. So it's a very expedited design process focused on those. And then we go into what we call procurement and third party manufacturing. So we send out all of these different sets and models to people that make kitchen pods, bathroom pods, structures, walls, floors, ceilings. These suppliers are all around the world. They start manufacturing. Those components start arriving in our facility and we clip them together. The verb I always describe is clipping. So we take a bathroom pod, clip it into the chassis, we clip the kitchen in, and then we end up with these volumetric modules that we stack on site. And for us, this first project that we stacked in November, we validated that we can stack eight modules in a day, which means that a 15 story building is up in three weeks.
Spencer Levy
You can do a 15 story building in three weeks. If you were to build a traditional 15 story multifamily building in New York City, how long would it take to build?
Andrew Staniforth
I would typically say for a 15 story building, you're looking at, let's say two years on our side and three and a half to four on the conventional side. So that's about a 50% time savings. The time savings for us comes from both the design phase and the on-site phase. So for us, on site is about a year. That's the foundations. The first floor is done conventionally, the stacking, and then what we call mate line. So that's where we mate the mods together. Other other companies call it zipping up the building where you connect everything. And that can take a few months, depending on the size and scale. So we're going to be stacking that building in about a year from now. And there'll be occupancy in the summer of ‘25.
Spencer Levy
So about half the time…
Andrew Staniforth
Half the time.
Spencer Levy
…when you go soup to nuts. And again, every building's different, costs are different. But as much apples-to-apples, what's the cost difference?
Andrew Staniforth
Parity.
Spencer Levy
So the cost of building a traditional building and the cost of building modular is the same. That's interesting.
Andrew Staniforth
So for us right now, we really focus on two value propositions that are resonant in today's market: the speed, because when your construction loans are double digits, time is money, right? Really, really valuable. You shave two years off a 12% construction loan, that moves the needle. You also think about a lot of developers who are IRR motivated. You pull two years back, it changes that reversion value. It changes their promote. So there's a lot of economic incentives when interest rates are high on the time of everything. The other thing that we're finding really resonant in today's market is how the sustainability of our buildings is impacting the cost of capital. So, because we're delivering buildings that are meeting passive house standards, so 75% reduction in operational carbon, the capital markets are reflecting that in interest rates, willingness to lend or willingness to put equity in projects. And we think that those two value propositions allow us not to have to discount below conventional costs.
Spencer Levy
This is the math moment for all of our listeners. You used the term, same price, same cost, but you have a lower interest rate. You have less labor on site. How could that be the same price?
Andrew Staniforth
What's the same is the hard cost price. So if you had a GMP in New York today, you're probably, if you're using, you know, a reputable CM, four hundreds, maybe low five hundreds in some markets, right?
Spencer Levy
Per square foot.
Andrew Staniforth
Per square foot. That's where we're going to price. But, the overall capitalization of the project, as you mentioned, less interest, less carry expenses. Your insurance policies are less by two years. Your total basis on that project will be less. But the hard costs we match as...
Spencer Levy
Got it. So I guess a granite countertop costs the same in a modular unit as it does...
Andrew Staniforth
Exactly. And we have toilets and countertops and flooring. It's the same, but the overall capitalization of the project through the time value is less.
Spencer Levy
So one of the things that we've talked about on this show at great length is affordable housing. How does modular fit into a solution for affordable housing?
Andrew Staniforth
I think there's a couple things. When it comes to affordable housing, and I'm talking about capital A affordable housing where you're getting government money to flow into the execution, you need a high degree of certainty because you're backed by the government. When you have a product like ours, you know what the price is the moment you start talking to us. Because I know what we can go and procure a bathroom pod for. And I can pass that certainty up to you. So the certainty is huge. The other thing is, if you look at the backlog of affordable housing in a market like New York, it's huge. Speed to just deliver that is really, really important. So if we can be a part of delivering a high degree of certainty and delivering the affordable housing much faster, that is huge. The other element of affordable housing… now this is not on the capital A affordable, but naturally occurring affordable housing. It's just an Econ 101 problem like supply and demand. The more housing that you build, it will lower the price. And I think as we start getting to scale, we hope to be able to move the market and build more housing so that the rate of increase in rents or, you know, I was just reading, cranes this morning, like, vacancy rates are at an all time low in New York, right? How do we alleviate some of the pressure? The solution to that has to be just more housing, period.
Spencer Levy
And we're trying to get as much of that housing where the people live, in high density areas and, sounds great but that's the hardest place to build.
Andrew Staniforth
It is. It is. Building in cities is hard. And when you think about the challenges of building in cities, there is the physical technical challenge, right? You're building taller. And for modular, typically it comes down to the tolerances between the modules. So if you're stacking something up two stories and it's off by an eighth of an inch, big whoop, it's off by an eighth of an inch. You compound that eighth of an inch 30 stories. Oh, you're raining on the inside. It's not good. So there's a technical challenge when you roll out into a high rise market. Then there's also just building in cities is difficult. The agencies that we talked about, the community, the interaction. If I am building a conventional building, I'm probably closing part of a road for multiple years. If I can go into that same neighborhood and say, hey, I just need it for a month. I'll be in and out. That's huge for getting the adoption, removing some of these barriers when you need to build housing in these neighborhoods.
Spencer Levy
So this is going to sound like a silly question, but, we'll see. I'm a tenant. I'm looking at apartment building A. I'm looking at apartment building B. Apartment building A is a traditional apartment. Building B is modular. Is it a neutral, negative or positive to come into your building?
Andrew Staniforth
Into our building, it will be a positive. And let me tell you why. On the modular front, you won't care. You won't even be able to tell. But because we're passive house, your electricity bill, it's going to be significantly less. We're delivering now not just passive house only, but also...
Spencer Levy
What does passive house mean, by the way?
Andrew Staniforth
Passive house is the high… you know LEED?
Spencer Levy
Yeah.
Andrew Staniforth
Think about LEED on, like, extreme steroids, right? It goes well beyond what people think about as the most sustainable. And the concept is, it is a passive house. It requires zero energy to heat or cool. So it's the highest performance you could possibly achieve in a building. So that's what we're doing. Other people call it net zero ready, as the other analogy. It's so low energy that if you put solar panels on it, it fully takes the load of the building. So passive house reduces your cost as a tenant. And we're also delivering, we partnered with WELL, they're rolling out a WELL for residential pilot. So it's not just going to be an extremely low energy building, but it's also going to be the highest level of wellness and healthy. So ventilation and things like that. So you're going to feel better as a tenant and pay less on your Op-Ex.
Spencer Levy
What kind of challenges do you see in the next two plus years to get your concept into something that is much, much bigger?
Andrew Staniforth
Yeah, yeah. So scale is very important at any company that is in the manufacturing sector, because the more that we can push through our company and feed it down to our suppliers, prices come down. And as prices come down, it means that we can have a better value proposition to our customers and keep that flywheel going. So the way that I think about expansion for us is, we're focused on New York because that is the hardest market. If you can do it in New York, you can do it anywhere.
Spencer Levy
If you can make it there, you can make it anywhere. Wasn’t there a song about that?
Andrew Staniforth
I'm sure. But right now, we're starting in New York and then growing from there. I like to say our roadmap is, take the list of most expensive cities and sort by descending order, and that's what we want to tackle. So starting in New York and then we're going to go to the Bay area, Toronto, all of these markets that have really, really difficult challenges building housing. That's where our solution is going to have the biggest effect.
Spencer Levy
Let's get a little tactical for just a moment. So I keep putting the Lego imagery in my head here. I was like, well, how do you put an elevator in there? What do you do for that?
Andrew Staniforth
Our goal is to ship out modules 90% complete. So the piece in that last 10% is the elevator and then all of the mainline connections. What we do ship out with the module is the shaft, fire rated with the clips. Rails typically span more than one floor, so we'll do the rails on site. The cab will be done on site, but the doors will be done in the module. Stairs are also done in the module. So really, you're going to have a shaft that's protected for OSHA. And they'll come in, put the rails, put the cab, and you'll have a fully done elevator.
Spencer Levy
So I'm walking down the street next to your job and a job right next to it. I couldn't tell which one's modular. Is that fair?
Andrew Staniforth
When it's done, you should not be able to tell. The team often comes to me and is like, oh, can we do this curvy building? Can we do this triangular building? So right now we're focused on rectangles, but there's nothing that prohibits us from doing a curved building or multi-sided building. The same approach can be applied to any topology, any shape of building in the markets that we're in.
Spencer Levy
Thinking about my Lego sets and the little figurines, they all have curved heads. I mean…
Andrew Staniforth
Exactly.
Spencer Levy
Even Legos figured it out.
Andrew Staniforth
Exactly. But they have the same connector, right? That is a key, right? So you can connect that little head to the square Lego piece. It's all based on what you standardize and what you let stay custom. And I think that's why I love the Lego analogy. For us, I want that connection detail to be identical regardless of the dimensions, regardless of the shape. Which means that when I combine it, sticking with the Lego analogy, I can make an Eiffel Tower or a Star Wars rocket ship, right? All with the same components. That's the principle of what we're trying to embody with what we're doing at Assembly.
Spencer Levy
Let's talk about an issue that has often been a stumbling block, which is labor. And I think that labor has historically said, well, this sounds great, less time, but that's less work on site. How do you deal with that issue?
Andrew Staniforth
One of the things around labor, which is really interesting, is the construction labor force is aging. And the metric that I always look at is like, average age of a construction worker. It's steadily been increasing, which means they're not getting enough labor coming in. There's a labor shortage on the construction side. So when we think about modular today, and this is different than it was even ten years ago, it is not competing for the same jobs. This is a net addition. And when I talk to a lot of our suppliers who were subcontractors in the field working on site, they would much rather do the same work in a facility, in a factory. And that's actually one of the big groups of suppliers that we work with. It's essentially subcontractors that have turned modular suppliers because their labor force wants to be indoors, not hanging off a building, not working in freezing cold. So what we're seeing is that the typical barriers and pushback from labor have gotten different and gotten a lot less now that there's a shortage of labor in the construction sector.
Spencer Levy
Let me just push it just a little bit further if I could. So I think the concern, if that's the right word, is that, okay, you've got the same subcontractors in the same markets doing the same work inside a factory. I get that, but you could outsource a box to a foreign country and it could be built there, and it could be built cheaper, and you could stick it on a ship right next to the 20 foot equivalent units and not know the difference.
Andrew Staniforth
Yeah.
Spencer Levy
Is that a concern?
Andrew Staniforth
Some people will be concerned, for sure. I think when it comes to the actual numbers, we are going to create net new jobs and net new housing. This is not going to compete with construction jobs or existing housing. So when you can think about it in those terms, I think it should make sense. But we're always going to get the pushback. People are always going to be concerned about us taking jobs. But when you look at the numbers, we need to build more housing. We're not trying to just build the housing that's already in the pipeline. We're trying to add net new housing into the pipeline, which means net new jobs. They are different jobs. They might be in our facility, they might be around the world. But we're not trying to replace what's happening today. We're trying to increase.
Spencer Levy
We're at the Future of Cities Conference here at Wharton-Weitzman. One of the things that I think is most important in the future of cities is to reuse what we got, right? And there's a lot of stuff out there that needs to be reused. And the biggest challenge of these office conversions is simply, how do you put in a bedroom and a kitchen and a bathroom? Is modular a potential solution to some of that problem?
Andrew Staniforth
I think for sure. I actually think that the biggest barrier to conversion is going to be on the regulatory side. If you follow the pathway of what defines a multiple dwelling unit in New York, you're starting in the DOB and then you're in five different other regulations. I think once we cross the regulatory barriers, then it becomes a innovation idea or an innovation problem. How do you build these retrofit apartments quicker, better, faster? And then I think you can put in potted kitchens, potted bathroom pods, potted risers that allow you to really advance that. But I do think it's going to start in markets like New York with the regulatory side.
Spencer Levy
So financing: a lot of big time developers are now looking at 50% loan to cost at 10%, if they're lucky. Tell us about how this product type gives you an advantage in the financing markets.
Andrew Staniforth
Yeah. I think in the financing markets, the metrics you just threw out, 50% and 10%, how does that flow into a project budget? Well, it flows to the project budget as your interest reserve, your capitalized interest, and it flows to the total capitalization of the project. So there's ways that you can change that. You can lower your interest on a project by having a lower interest rate. You can also lower the interest on a project by having the interest outstanding for less time, right? And this is where the time value comes in. If you're paying 10% for half the time, how different is that than paying 5%? Now, obviously we know that you're drawing capital at different speeds. So it's not a perfect analogy, but shaving half the time does have a significant impact on bridging the difference between the 5% loan and a 10% loan.
Spencer Levy
But there are specific government programs that favor not just modular but, call it, sustainable or green prototypes. Tell us about that.
Andrew Staniforth
Yeah. What we've found as we've started to go into this commercialization phase of the business, is that the sustainability of what we're doing is at the forefront in a lot of lenders' minds. So, for us, the fact that we're building to passive house standards, we are following Phius, which is the U.S. version of passive house, 75% reduction in operational carbon. So it means 16 inches of insulation, triple paned windows, really, really efficient HVAC systems. But the capital markets are looking at this as something that they want to get behind. So our second project, the 15 story one that we're doing, our pre-development loan was through NYCEEC, and they are really focused on…
Spencer Levy
And just explain who that is.
Andrew Staniforth
NYCEEC is the New York City Energy Efficiency Corporation. And they are focused on bridging the gap between solutions that have impact on sustainability and where the general market would otherwise not be there. So you go to your standard regional bank and say, I want to build the first high rise passive house building. Don't even talk about modular. They're not there yet. So NYCEEC is focused on that and they price accordingly. You got a discount on the interest rate for that. And we've seen other lenders in the CDFI space that really are focused on sustainability as a way to drive market adoption and using their cost of capital, a lower cost of capital, to get it into the market to start that flywheel. We're also seeing on the equity side from partners, primarily in Europe, where they have maybe stronger or clearer mandates around sustainability, really focusing on only investing in the most sustainable projects. And I think that's going to continue to permeate across global asset allocators and things like that as the “nice to have”, “need to have” of sustainability continues to move in that “need to have” direction.
Spencer Levy
Given that the modular construction business is more mature in Europe than it is here, I'm sure there's been a lot more equity that's gone into it, there have been trades. Do you see any difference in the, and again, just bottom line. Apples to apples, same rent roll, building A, building B. This is modular, this is traditionally built. Same value.
Andrew Staniforth
Same value. The one thing I will say is the impact on the operations when you introduce the sustainability that comes often with a modular approach like ours does juice your NOI, because your operations are less expensive. So maybe the building looks the same, but your NOI is better, so it trades at a premium. And I think a lot of the modular companies, us included, think about resilience as one of the most important things. So you think about flood resilience. You think about climate resilience. That's sort of embedded in our process because as someone who designs subassemblies, we want our subassemblies to work on multiple generations of buildings. And if climate is going to continue to change, we don't want to have to continue to revise those. So we design and futureproof a lot of our systems thinking about that resilience going forward.
Spencer Levy
Let's get even more tactical. You've got a site, you've got a client, a 15 story building. How different is the process of designing that building than designing a traditional building?
Andrew Staniforth
So what we would do is, when we kick off with a client, typically a client comes to us with a site, maybe some zoning information and a general program. They want a mix of one bedrooms, two bedrooms, studios, and a level of finish that they're going for. They want to price this at 65 bucks a foot or 95 bucks a foot. We take that, and the first step for us is what we do is a modular feasibility study. So we lay out the building using the constraints we know of our modular system. And those constraints are typically maximum width of 14 feet for transportation, maximum height of like 11 and change so that we don't get stuck under bridges and stuff like that. And we lay out the building. And we lay out the modules, we lay out the apartments, and we start discussing that with the developer. What's really interesting, though, is that programing study is actually all of the work you need to do on all the structural engineering, because as you program that building, you drop these chassis that are designed already. So in a few weeks of interacting with the developer to lock in a program, you've now done basically all of the structural. You can go to print on the structure. Now, obviously, as a business model, we always involve engineers of record to make sure that it's safe and stuff like that. But a lot of that work happens almost instantly. So then the rest of the time, instead of focusing on, you know, we've all sat in, you know, OAC meetings where you're coordinating amongst everyone, you can focus on the things that are actually going to drive revenue to that developer. So focus on the finishes, focusing on maybe the facade design. A lot of these things that are going to drive real value, that's what we focus on, the design. We start our approval process very early because a lot of the things related to life, safety and structures are done as they're embedded in our system. They don't change. So we can start that process really early, get to a place where we have approval on the projects earlier than conventional, and then we can kick off manufacturing, and that's when our suppliers start making the subassembly components. And then they all come into our factory and we go through the assembly, stacking and mainline.
Spencer Levy
Given the uniformity of the boxes, not to be pejorative, but the uniformity of the boxes, how good are your programs today to be able to press a button, say, I can get 500 boxes here. Let's see my 20 different design options at the push of a button. Are we there yet or we're not quite there yet?
Andrew Staniforth
We are there… so I call those configurators. Everyone says they have a configurator. I actually think that you can get a really, really far away with configurator, but in the markets that we're dealing with like New York, you're maximizing that last one FAR. Like you need that foot. So there is a massage with a human there, and architect, to make sure that we're maximizing that FAR completely. One of the things that we do, though, that is different than just the program and configurator side of it, is as soon as you lock that layout, you go all the way to fabrication level of detail. So it's not like we have concept design, schematic, DDs, CDs, shop drawing submittals. Like, you do that program, you're in shop drawings. And we use what's called CATIA. It's the software that aerospace, automotive–it's actually mandated for basically all defense contracts because it has a much higher level of detail. That's how we capture the models, instead of just using the standard tools of architecture. And a lot of the technology that we build out and our tech team focuses on is the interoperability, because we want our architect of record to be able to produce a standard set of drawings for the DOB, but we also want a high fidelity model that we can send off a supplier in a day or a week after we've started thinking about a project that has all the detail they would need to manufacture a job. And that's a lot of the software, is how do you have a central source of product information that can be pushed into all these different mediums, for all the different stakeholders needed on a project?
Spencer Levy
So you're not quite pushing the button yet, and you never will be.
Andrew Staniforth
I don't think we ever want to be. I think that's a big part of it. We want to… and we have a big philosophy at Assembly is, if you start with automation, you automate the wrong thing. And we believe that on the physical side and the digital side. When I was in the development world, you get pitched by all these startups and they're like, we have come up with this automated solution for blank, and I'm like, have you done it before? How did you know what to automate? How do you know? So we have a concept that we call reps. You need reps, like going to the gym. And what we've done over the last now, five years is, we've gotten a lot of reps. We've done a lot of prototyping. We've stacked our first building. That first building, we stacked it actually three times before it was complete. Stacked it, took it down, stacked it, took it down because we needed to move up the learning curve. That's how you get a rep. And now we know what to automate in our digital flow, what to automate in the factory. And that's the phase we're in now. So if I told you I have an automated solution that automates all buildings, you should roll your eyes at me. But me telling you that we've now built a building, done a ton of prototyping, are working on a 15 story one, have another one in the pipeline, and now we're starting to think about what we should build specific tech solutions for. That is a much, much more rigorous answer, because we know where the problems are and we can build solutions around those specific problems without this catch-all, glitzy software solution.
Spencer Levy
How do you see modular expanding beyond housing?
Andrew Staniforth
Yeah. So for us, we're starting with residential. We think that the adjacent to residential makes a lot of sense. So, student housing, hotels in the hospitality sector. I think that's probably topology number one. Topology number two, we've got a lot of interest from the medical field, hospitals and things where the complexity of the infrastructure that goes in, if you can do that off site, huge. Then I think the next would be retail. We've had an interest from schools, things that are repeated. I don't think that volumetric solutions are great for office, nor do I think they're great for industrial. Column spans, right? You build a Class-A office building, you need 50 foot spans. And also who's building Class-A office right now? I don't know. But that's how we think about it. It's really the residential and residential adjacent as the core market today.
Spencer Levy
We're just about out of time so I'm going to ask you a wrap up question, and I'll do this in honor of Sam Zell. Sam Zell was a guest on this show. And, you know, he is revered in our industry. Let's assume the ghost of Sam Zell shows up now, and he owns three parcels of land in New York City that you'd like to build on. You just run into him in an elevator. You got 30 seconds to sell your product versus traditional. What do you say to him?
Andrew Staniforth
What I would focus on is, Sam, you have these parcels, right? You are in New York City. Those parcels are ticking, your land basis is high. You need to activate those sites really quickly and you need to start getting rent. We can deliver those buildings at the same cost as you would at the highest levels of sustainability in half the time. Here's our contract. Can you please sign? That's what I’d do.
Spencer Levy
On behalf of The Weekly Take, what a great conversation today talking about modular with Andrew Staniforth, CEO of Assembly OSM. Congratulations on your success so far, and you're just at the beginning.
Andrew Staniforth
Thank you. This was great.
Spencer Levy
For more on modular and related content, please visit our website, CBRE.com/TheWeeklyTake. You can also send us your feedback with the Talk to Us button on the landing page to help us construct our future programming slate. We're already assembling some great episodes, including tactical conversations on the use of data in property management, the risks and rewards of business disruption with an innovative investment advisor and author, and the perspectives of other business leaders with big ideas. And before we leave the topic of building, if you like what we do, we hope you'll not only join us for those episodes, but continue to help us build our audience by sharing this show and subscribing to our feed on Apple Podcasts, Spotify, or wherever you listen. Thanks for joining us. I'm Spencer Levy. Be smart. Be safe. Be well.
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